Mr. Offenberg added, "Crosman's leadership in airgun products and continued penetration into the archery market makes it a strong addition to our family of leading middle market businesses. Subsequent to quarter end, CODI completed the add-on acquisition of LaserMax's Commercial business for Crosman, supporting the company's expansion into complementary markets while creating new cross-selling opportunities. During the second quarter, we also completed an offering of 4 million preferred shares, generating $100 million in gross proceeds. With an enhanced capital structure and over $500 million of available liquidity, CODI is well positioned to pursue attractive platform and add-on acquisitions that generate strong free cash flow and support our ability to provide attractive and consistent cash distributions."

Operating ResultsFor the quarter ended June 30, 2017, CODI generated Cash Provided by Operating Activities of $37.3 million, as compared to Cash Provided by Operating Activities of $39.5 million for the quarter ended June 30, 2016. CODI reported Cash Flow (see Note Regarding Use of Non-GAAP Financial Measures below) of $25.5 million for the quarter ended June 30, 2017, as compared to $15.6 million for the prior year's comparable quarter. CODI's weighted average number of shares outstanding for the quarters ended June 30, 2017 and June 30, 2016 were 59.9 million and 54.3 million, respectively.

Cash Flow for the second quarter of 2017 reflects year-over-year earnings growth in the Company's Advanced Circuits, Sterno Products, Ergobaby, Manitoba Harvest and 5.11 businesses, offset by declines at the Company's Arnold Magnetic and Clean Earth businesses. The acquisition of Crosman also contributed to the second quarter earnings growth.

CODI's Cash Flow is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. However, Cash Flow excludes the gains from monetizing interests in CODI's subsidiaries, which have totaled over $770 million since going public in 2006.

Net loss for the quarter ended June 30, 2017 was $2.7 million, as compared to net income of $19.4 million for the quarter ended June 30, 2016. During the second quarter of 2016, CODI realized a net gain of $18.9 million related to its equity investment in its former subsidiary Fox Factory Holding Corp. ("FOX"). During the first quarter of 2017, the Company sold its remaining shares in FOX in a secondary public offering.

Liquidity and Capital ResourcesAs of June 30, 2017, CODI had approximately $39.3 million in cash and cash equivalents, $562.8 million outstanding on its term loan facility and $3.7 million in outstanding borrowings under its revolving credit facility. The Company has no significant debt maturities until 2019 and had net borrowing availability of $544.6 million at June 30, 2017 under its revolving credit facility.

In June 2017, the Company completed a public offering of 4.0 million of its 7.250% Series A Preferred Shares with a liquidation preference of $25.00 per share. CODI raised $96.6 million of net proceeds from the offering, which was used to repay a portion of the outstanding balance of its revolving credit facility and for general corporate purposes.

Second Quarter 2017 DistributionOn July 6, 2017, CODI's Board of Directors declared a second quarter distribution of $0.36 per share. The cash distribution was paid on July 27, 2017 to all holders of record as of July 20, 2017. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $15.3552 per share.

Conference CallManagement will host a conference call on Thursday, August 3, 2017 at 9:00 a.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (855) 212-2368 and the dial-in number for international callers is (315) 625-6886. The access code for all callers is 52994183. A live webcast will also be available on the Company's website at www.compassdiversifiedholdings.com.

A replay of the call will be available through August 10, 2017. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 52994183.

Note Regarding Use of Non-GAAP Financial MeasuresCAD, or Cash Flow, is a non-GAAP measure used by the Company to assess its performance, as well as its ability to sustain and increase quarterly distributions. A number of CODI's businesses have seasonal earnings patterns. Accordingly, the Company believes that the most appropriate measure of its performance is over a trailing or expected 12-month period. We have reconciled CAD, or Cash Flow, to Net Income and Cash Flow from Operating Activities on the attached schedules. We consider Net Income and Cash Flow from Operating Activities to be the most directly comparable GAAP financial measures to CAD, or Cash Flow.

About Compass Diversified Holdings ("CODI")CODI owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market.

CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

Our nine majority-owned subsidiaries are engaged in the following lines of business:

The design and marketing of purpose-built tactical apparel and gear serving a wide range of global customers (5.11);

The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);

The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);

The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);

The design and manufacture of premium home and gun safes (Liberty Safe);

The manufacture and marketing of branded, hemp-based food products (Manitoba Harvest); and

The manufacture and marketing of portable food warming fuels and creative ambience solutions for the hospitality and consumer markets (Sterno Products).

This press release may contain certain forward-looking statements, including statements with regard to the future performance of CODI. Words such as "believes," "expects," "projects," and "future" or similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and some of these factors are enumerated in the risk factor discussion in the Form 10-K filed by CODI with the SEC for the year ended December 31, 2016 and other filings with the SEC. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Compass Diversified Holdings

Condensed Consolidated Balance Sheets

June 30,

December 31,

2017

2016

(in thousands)

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

39,287

$

39,772

Accounts receivable, net

194,823

181,191

Inventories

229,465

212,984

Prepaid expenses and other current assets

25,922

18,872

Total current assets

489,497

452,819

Property, plant and equipment, net

157,588

142,370

Investment in FOX

—

141,767

Goodwill and intangible assets, net

1,146,655

1,030,848

Other non-current assets

9,205

9,351

Total assets

$

1,802,945

$

1,777,155

Liabilities and stockholders' equity

Current liabilities

Accounts payable and accrued expenses

$

175,993

$

152,553

Due to related party

7,598

20,848

Current portion, long-term debt

5,685

5,685

Other current liabilities

14,000

23,435

Total current liabilities

203,276

202,521

Deferred income taxes

126,538

110,838

Long-term debt

548,546

551,652

Other non-current liabilities

18,352

17,600

Total liabilities

896,712

882,611

Stockholders' equity

Total stockholders' equity attributable to Holdings

862,268

856,405

Noncontrolling interests

43,965

38,139

Total stockholders' equity

906,233

894,544

Total liabilities and stockholders' equity

$

1,802,945

$

1,777,155

Compass Diversified Holdings

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended

Six Months Ended

(in thousands, except per share data)

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

Net sales

$

307,381

$

214,176

$

597,373

$

407,463

Cost of sales

197,661

137,506

393,320

266,674

Gross profit

109,720

76,670

204,053

140,789

Operating expenses:

Selling, general and administrative expense

79,575

44,767

158,298

87,054

Management fees

8,183

6,588

16,031

12,959

Amortization expense

14,779

8,163

25,089

15,543

Impairment expense/ Loss on disposal of assets

—

6,663

8,864

6,663

Operating income (loss)

7,183

10,489

(4,229)

18,570

Other income (expense):

Interest expense, net

(8,418)

(7,366)

(15,554)

(18,828)

Gain (loss) on investment

—

18,889

(5,620)

8,266

Amortization of debt issuance costs

(1,003)

(570)

(1,936)

(1,140)

Other income (expense), net

952

(1,837)

930

1,419

Income (loss) from continuing operations before income taxes

(1,286)

19,605

(26,409)

8,287

Provision (benefit) for income taxes

1,454

1,588

(2,194)

4,884

Net income (loss) from continuing operations

(2,740)

18,017

(24,215)

3,403

Income from discontinued operations, net of income tax

—

1,341

—

928

Gain on sale of discontinued operations, net of tax

—

—

340

—

Net income (loss)

(2,740)

19,358

(23,875)

4,331

Less: Income (loss) from continuing operations attributable to noncontrolling interest

1,372

(70)

1,842

1,067

Less: Income from discontinued operations attributable to noncontrolling interest

—

189

—

48

Net income (loss) attributable to Holdings

$

(4,112)

$

19,239

$

(25,717)

$

3,216

Basic and fully diluted income (loss) per share

Continuing operations

$

(0.53)

$

0.31

$

(1.14)

$

0.02

Discontinued operations

—

0.02

0.01

0.01

$

(0.53)

$

0.33

$

(1.13)

$

0.03

Basic and fully diluted weighted average number of shares outstanding

59,900

54,300

59,900

54,300

Cash distributions declared per share

$

0.36

$

0.36

$

0.72

$

0.72

Compass Diversified Holdings

Summarized Statement of Cash Flows

(unaudited)

Six Months Ended

(in thousands)

June 30, 2017

June 30, 2016

Net cash provided by operating activities

$

35,868

$

45,534

Net cash used in investing activities

(44,386)

(99,589)

Net cash provided by (used in) financing activities

8,532

(6,831)

Effect of foreign currency on cash

(499)

(3,823)

Net decrease in cash and cash equivalents

(485)

(64,709)

Cash and cash equivalents — beginning of period

39,772

85,869

Cash and cash equivalents — end of period

$

39,287

$

21,160

Compass Diversified Holdings

Condensed Consolidated Table of Cash Flows Available for Distribution and Reinvestment

(unaudited)

Three Months Ended

Six Months Ended

(in thousands)

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

Net income (loss)

$

(2,740)

$

19,358

$

(23,875)

$

4,331

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

31,187

15,012

62,582

29,920

Impairment expense/ loss on disposal of assets

—

6,663

8,864

6,663

Gain on sale of businesses, net

—

—

(340)

—

Amortization of debt issuance costs and original issue discount

1,261

737

2,460

1,475

Unrealized loss on derivatives

1,497

2,755

1,268

9,983

(Gain) loss on investment in FOX

—

(18,889)

5,620

(8,266)

Noncontrolling stockholders charges

1,798

859

3,250

2,048

Excess tax benefit on stock compensation

—

(366)

—

(366)

Provision for loss on receivables

9

73

3,327

203

Other

384

270

704

79

Deferred taxes

(4,305)

(6,205)

(11,940)

(5,991)

Changes in operating assets and liabilities

8,191

19,242

(16,052)

5,455

Net cash provided by operating activities

37,282

39,509

35,868

45,534

Plus:

Unused fee on revolving credit facility

696

437

1,473

937

Successful acquisition costs

1,473

1,238

1,473

1,727

Integration services fee (1)

875

250

1,750

500

Realized loss from foreign currency effect (2)

—

20

—

—

Excess tax benefit on stock compensation

—

366

—

366

Changes in operating assets and liabilities

—

—

16,052

—

Other

—

315

—

128

Less:

Maintenance capital expenditures (3)

4,338

5,982

9,068

9,666

Payment on swap

1,026

1,294

2,115

1,794

Changes in operating assets and liabilities

8,191

19,242

—

5,455

Realized gain from foreign currency effect (2)

1,260

—

1,650

3,059

Other (4)

8

—

3,366

—

Estimated cash flow available for distribution and reinvestment

$

25,503

$

15,617

$

40,417

$

29,218

Distribution paid in April 2017/2016

$

—

$

—

$

21,564

$

19,548

Distribution paid in July 2017/ 2016

21,564

19,548

21,564

19,548

$

21,564

$

19,548

$

43,128

$

39,096

(1)

Represents fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership, payable quarterly.

Excludes growth capital expenditures of approximately $6.5 million and $0.2 million for the three months ended June 30, 2017 and 2016, and $10.4 million and $0.9 million for the six months ended June 30, 2017 and 2016, respectively.

(4)

Includes amounts for the establishment of accounts receivable reserves related to a retail customer who filed bankruptcy during the first quarter of 2017.